Translated from the following Norwegian link: http://www.aftenposten.no/meninger/debatt/article3597992.ece

Gas prices so far below the price of oil may have very serious consequences for the welfare of gas exporter Norway. Shale gas, which was virtually unknown two years ago, is changing both energy prices and policies around the planet. The technical revolution that has made shale gas available has halved gas prices everywhere, changed political balances, weakened the competitiveness of coal and delayed the shift to alternative energy sources. What we believed to be a valuable resource in the Barents Sea has become worthless overnight. Norwegian gas revenues are plummeting and thereby threaten the states lon-term welfare.

Shale gas can be found virtually across the globe, but has not had any real value before the breakthrough in production, through horizontal drilling and fracturing techniques. The production cost is now roughly halved compared to the normal natural gas.

Although Norway has very little shale and therefore shale gas, the development is very important for Norway. Our oil production has already fallen by a third since the peak year of 2003, but we have natural gas to maintain the volume of our energy exports for many decades. We have assumed that our income will also be maintained because gas prices have historically been tied to oil prices. Shale gas has already broken this connection in the U.S., and is about to pull the rug out from under the geopolitical game that has been so beneficial to Norway. A gas price far below the price of oil is very serious for the welfare of gas exporter Norway.

The International Energy Agency estimates that the world has 456 TCM of shale gas, and can recover about 30 percent of this. This means that the world's gas shale reserves are now on par with the proven natural gas reserves known to exist.

Production costs for shale gas is now about three U.S. dollars per. Mbtu (unit of measurement for natural gas), or well under half of the historical natural gas price in the U.S..

It is located close to consumers. Shale gas will more than double the supply of gas for the U.S. and the EU, according to the IEA, and quadruples the supply in China. The major consuming countries have now access to enormous resources in their own backyards.

Shale Gas in the United States has already led to an aggressive investment boom. We're in the game with an investment of tens of billions.

Within the EU is a major research program underway in Germany, drilling rigs are in place in Poland and southern Sweden are promising.

Shale gas is changing the geopolitical game fundamentally, and there is no advantage for us. So far we have been succesfully able to play on the world gas arena and gas has a central role in Norwegian politics. By being on the rocker and at all times supporting the one who pays most, a few very large gains by a small position.

Norway has played elegantly with changing pipelines to continental Europe and England, declarations of friendship and frequent state visits to Russia, and liquefied natural gas to the United States. President Reagan began with a personal interest in the Troll field, because he correctly saw it as a significant weakening of the Soviet Union's influence in Germany and the Continent. All this has led to long-term gas contracts with prices tied to oil prices and the obligation to pay even if the recipient does not receive any gas. We have been able to finance the huge developments, and could look forward to stable, high income even with rapidly declining oil production.

Shale gas will not outperform our North Sea gas pipelines which have already been laid, or even new satellites finds - as long as they can use existing pipelines. But gas from the Barents Sea no longer looks to have any economic value. The cost of seven to eight U.S. dollars is over double the the cost of shale gas, and also significantly higher than gas in pipelines from Algeria, Iraq, Iran and Turkmenistan. No wonder that the Shtokman gas field in reality is canceled. With what we know today the Snow White fields would not have been developed either.

Possible gas from Nordland 6 and 7 off the Lofoten Islands will also be too expensive if it must be transported by ship. If we were to find a giant field that justified a pipeline down to the network in the North Sea, then the gas may have some value even that far north.

Role Changing Russia-United States.
For Russia, shale gas is an economic problem and a political challenge: Economic problem, because gas prices are lower and Russia have neglected the development of alternative value. Political challenge because the EU now has its own local gas as the regular threat to cut gas supply have little effect.

For the United States, the situation is opposite. The country would have become the major importer of natural gas and has constructed 19 terminals for its imports. Now the country could be self-sufficient within a couple of years, and the terminals can be used for gas exports and a reduced deficit in trade balance. Politically, this means that the country does not need to take into account the need for gas from Russia and the Middle East, and it gives a new freedom in foreign policy.

Climate Challenge.
For climate change is shale gas is a problem because, paradoxically likely to lead to greater emissions of CO (-2). Gas is certainly the least polluting fossil energy by more than one-third less emissions than coal. But the low price will lead to increased use of the fossil, and weaken the competitiveness of alternative energy sources. The hope that market mechanisms through high oil prices could help to solve the emissions problem, the less realistic.

LNG vessels unchanged.
For Norwegian shipowners with LNG carriers (liquid gas) demand will be there in the short term, but long-term growth will be gone. Lower gas prices leads to increased volume when gas replaces coal. In the short term, sustained gas production because the plants are already built, but there is no new LNG plants.

The energy market has once again demonstrated its ability to surprise with new conditions and opportunities. We just have to remember what Charles Darwin said in the species origin: It is not the biggest and strongest who wins, but the transition quickly.